Madam Speaker, I am pleased to rise and say hello to the foreign affairs minister who is here to hear this barn burner.
We are talking about the budget implementation bill. When we had this budget a few months ago, some important things were in it. I know one of the members said that the government had done nothing for small business. Therefore, I reviewed what was in the budget as it related to small business.
I want to share with the House some of the things that happened in 2004, which the budget implementation bill is working through the all the details and implementing, in this important sector, the small business sector, a key creator of innovative ideas which creates jobs in Canada.
Here is what happened.
We accelerated by one year the planned increase in the small business deduction limit to $300,000 by 2005. We removed the impediment to small business fully accessing the 35% refundable scientific research and experimental development investment tax credit on expenditures up to $2 million. We extended the non-capital loss carry forward period of all taxpayers to 10 years. We implemented a new government electronic tendering system to provide fair equal access and less expensive access for all businesses in applying to the government for procurement opportunities. Finally, we committed the federal government to work with small business groups to reduce the paper burden.
I have often found that if we do a little homework on the matter before the House, it generally answers the questions that members might rhetorically raise.
There are a number of initiatives in terms of building the economy: research and innovation, commercialization of research, strengthening Canada's business advantage and the list goes on.
Each budget has a theme and each budget has some important contributions to make to the next stage in building on prior budgets. I want to raise that because I have often thought that it is difficult to assess a budget in isolation. What we really have to do is look at a series of budgets in the context of where we have been.
There has been some discussion that we have very little or no growth in the net paycheques of Canadians. The government not only introduced but implemented and extended to Canadians a $100 billion tax reduction program. One of the most expensive elements of that was also the indexation of the income tax system. That means that every year the exemptions, the credits, are indexed. It means every year there is a tax reduction for Canadians, and this is a forever thing.
I wanted to raise this because there is an interesting discussion ongoing. The hypothesis is that if there is a surplus at the end of a fiscal period, that represents an overtaxation of Canadians and that it should go back to the people. I wish it were that easy. I am a chartered accountant by profession and I have dealt with this. As businesses move through a fiscal period, they do not have the opportunity to hit the target right on the button because there are things that are not in their control.
We were fortunate to balance the budget back in 1997, and have continued to balance the budget. We have had surpluses of varying amounts since that time. It is accumulated. It is over $50 billion which has been used to repay debt in Canada.
The debt issue was a very serious issue in Parliament back then. Debt had grown to $576 billion. Thirty-seven cents out of every dollar was going to pay interest to service the debt. Today it is down to 22ยข on the dollar. It means that we have paid down approximately $500 billion of the national debt. The debt to GDP ration is coming down into the areas in which the senior economists across the country have said that these are levels which are more acceptable.
Once Canada was called a third world country because of the size of our debt. We brought it down. It was fiscally responsible to bring it down to a range of reasonableness. It also has caused a permanent savings to the people of Canada. The relief on the debt interest is creating about $3 billion in interest saved. That is $3 billion we can count on being there which otherwise would not have been there. It means we can dedicate the surplus and the interest savings to new programs and services for Canadians.
When the Liberals assumed the government from the Conservative Party in 1993, the deficit was $42 billion. The government was spending $42 billion more than it was taking in and a great proportion of that happened to be debt interest. It is very fortunate that through prudent fiscal management the deficit was eliminated within three years, and in 1997 we had a balanced budget. Yes, there have been some surpluses.
However, when it was projected that the budget would be balanced, there was a great discussion in Canada about the fiscal dividend to Canadians and how would Canadians benefit from that dividend in terms of the savings achieved. Some people would say that to the extent we balanced the budget, we trimmed all those programs and we saved the spending on interest expenses. Now we have the surplus, we should give back to Canadians. However, that is not quite so.
The fiscal dividend is not the surplus that is generated. It is the savings on interest expense when that surplus is applied against the debt. That is the true fiscal dividend when there is a permanent savings. Surpluses and deficits can vary from time to time. In the last budget we had the incidence where in the fourth quarter the performance in the corporate sector was outstanding and way beyond the expectations of all the forecasters. More revenues were coming in because of the more robust economy which meant more revenue for the federal treasury in terms of taxation. That is not a bad thing.
Ironically, all of a sudden the whole discussion shifted from our debt being too high and paying too much interest to we had a surplus and that was a bad thing. The government is being criticized for fiscal prudence, for a balanced approach in budgeting, to creating a surplus, to paying down some debt, to earning interest savings, to investing in new programs, particularly health care, because there are surpluses.
The Conservative member who spoke first in this debate today said that we needed serious tax cuts. I said to the member that there were 15 million Canadians who filed tax returns and paid taxes and another 5 million Canadians who filed tax returns who paid no taxes but they filed to get their GST credit and the other benefits available through filing a return.
Assume we are talking about 15 million Canadians filing a return in which they declare and pay taxes. If we were to give each one of those people $100, that would mean $1.5 billion of spending. It would mean $1.5 billion of revenue reduction for the government, which would mean it would go right to the bottom line. In a year $100 is $2 a week. It is not a meaningful amount to the vast majority of Canadians. To the low income and poorer Canadians $100 is $100, and it is very important. However, $100 to taxpayers costs $1.5 billion. If we were to raise that to $500, all of a sudden it is $6 billion of revenue reduction. If we were to grant that $6 billion of reduced revenue, it would be $6 billion the next year and so on. It is a forever thing.
The Conservatives say if we have a $9 billion dollar surplus, we should give $9 billion worth of tax breaks. It does not work that way because the surplus occurred only one year. There is no guarantee that we will not hit a recession next year or the year after that. We have been very fortunate for the last 10 or 11 years. However, one year of a deep recession can cost Canada about $15 billion in EI benefit payments alone
Let us be very careful not to equate a one year surplus to the ability to grant tax cuts every year. It is a bit ingenuous to suggest we have to return the money. The government cannot give tax cuts this year and then take them back next year. That is not the way the system works. The system could not possibly respond to the uncertainties in the economy.
Yes, the moneys belong to Canadians. Every member should say that the Government of Canada does not have any money of its own. The money belongs to all the citizens of Canada. However, when the government manages fiscal affairs of the nation, it has to be fiscally prudent. It has to ensure that the debt is in a manageable state. It has to ensure that it will to stay out of deficit. Canadians want to stay out of deficit. The government has ensure that important legislative programs are properly supported and funded. These are promises to Canadians that will be kept. They have to do with the fundamentals of the health care system, of pensions for seniors, of help for families, the GST credits and all the other tenet things about which we have spoken.
I asked the Conservative member to tell me what serious tax cuts the Conservatives wanted. If they understood that $100 is $1.5 billion, what would the Conservatives do and what was the number? I was puzzled to hear the answer. The answer was that we had refundable tax credits. Virtually every tax credit in the income tax system is a non-refundable credit. Once people's incomes are reduced to zero, they do not receive a refund. A political donation is a refundable credit.
I do not think I have heard the answer yet. Meaningful tax cuts are important. However, they have to be done in a prudent way to ensure that we balance the budget, pay down debt, sustain our mandated and legislated programs and keep our priorities straight and in line with those of Canadians.